IndustrySpeak: No fireworks this Diwali as ad spends dip 20 pc across Asia

‘Business is down’, is the general lament heard everywhere. Even Diwali, traditionally a time for heavy spendings, has not been able to lift the market sentiment much owing to the global economic crisis. Assocham data shows a 25 per cent drop in spendings, while according to ZenithOptimedia, ad spends in the festive season has gone down by 40.9 per cent. A recent R3 research also shows a 20-plus per cent cut down on marketing ad spends by top 100 Asian brands from the initial FY09 budget.

exchange4media spoke to India’s ad fraternity, along with Jonathan Barnard, Head - Publications, ZenithOptimedia, and Greg Paull, Principal and Co-founder, R3, to better understand the implications and the way ahead.

Worst-affected festive season

Chandradeep Mitra, President and Head, Mudra Max, said, “There is a definite dip, but it varies from category to category. Realty is probably the most affected. Compared to last year, this year there has been a 15-20 per cent dip in the Diwali season activities, and it is ATL activity that has suffered the most, while BTL is still doing well.”

According to Sriram Iyer, CEO, StreetCulture, “This is perhaps the worst-affected festive season that India is witnessing as the global economic slowdown has not spared even the Diwali gift boxes being distributed by India Inc. As Assocham’s research clearly shows, companies have slashed their budgets by 25 per cent from last year’s spend of Rs 2,000 crore.”

Iyer further said, “This year, there has been a cut in the overall out-of-home ad spend by sectors such as consumer durables, automobiles, and the financial sector. As a result, the overall OOH spends have seen a dip of approximately 35-40 per cent during the festive season from last year.”

ZenithOptimedia’s Jonathan Barnard pointed out, “Ad spend in India did increase by 32.5 per cent during 2007, increasing its share of the GDP from 0.50 per cent to 0.58 per cent, and we predict that this share will reach 0.62 per cent by 2010. The ad market’s performance in 2007 was 4.5 percentage points higher than in 2006, but we predict that this acceleration in growth will stop in 2008, falling to 9.9 per cent, although it will recover to about 18 per cent in 2009 and 2010. The growth of the advertising market can be attributed to the introduction of new technology as well as a more advertiser-friendly tax and regulatory infrastructure than what previously existed in India.”

“Looking at the last year, the ad spend in India during the festive season (October-December) across the print, TV and radio mediums was Rs 7,626.33 crore, of which consumer durables accounted for 40 per cent; packaged goods, 25 per cent; cellular services 31 per cent; and corporate advertising accounted for 3 per cent. This year, however, owing to the global slowdown, we predict that this shall come down to Rs 4,500 crore.”

Satish Singh, CEO, OMI, says, “India as a country has not faced any recession; but because of the slowdown in the global economy and share market, the Indian outdoor industry has faced a dearth of advertisements from its much loved money spenders namely, Financial Sectors, Retail- consumer durables and Automobile sector. It’s a wait and watch game that is being played by the clients, which is why ‘Diwali’ is just a word on the calendar and not an occasion.”

Everyone is feeling the pinch

CVS Sharma, CEO, Arc Media Worldwide, said, “Media is highlighting all the bad news in bold. While very few have been directly affected by the sequence of these events, the insecurity that people are feeling is making them tighten their purse strings. The last decade has seen the emergence of confident spenders. This is the first worst hit season after the dotcom bust. These are still initial ‘wait and watch’ reactions as consumers are just postponing their spends.”

“Everyone is feeling the pinch. I would assume that the effect on ATL is more than BTL. But again, we cannot generalise. Something like retail activation does convert numbers on ground. So, I don’t think marketers are pruning that part. But yes, they are more selective when making these choices,” he added.

Abdul Khan, Head - Marketing Tata Indicom, remarked, “This year is not a happy Diwali for the ad fraternity in India and it is natural, bordering on the threshold of a recession. Secondly, there is a lot of liquidity crisis, which has affected both ATL and BTL activities. However, we have maintained the ad spend of last year.”

Shalini Degan, Category Director, Britannia, said, “Britannia is not perturbed by the economic slowdown, as a result, it has maintained a double digit increase in the ad spends in comparison to last year’s budget for the festive season.”
She further said, “This year, we have done a merchandising spend that is equivalent to a decent TV ad, mainly because we aim to promote healthy biscuits with our ‘Shubh Kaamnayein collection’ for this year’s Diwali. We shall continue to be bullish till Christmas and give chocolates a run for their money.”

Focus more on engagement

Giving an insight on the forecast by the Top 100 brand spends across Asia, Greg Paull, Principal and Co-founder, R3, said, “We conducted a survey two weeks ago that consisted of more than 50 marketers, over 90 per cent of whom said that the global financial crisis would prompt their companies to reduce their 2009 ad budgets. The marketers surveyed covered 100 of Asia’s top 500 brands and the group included multinational and local companies in India, China, Korea, Taiwan, Singapore, Thailand, and Malaysia.”

The study also identified a shift in the region from traditional advertising to digital, direct marketing and activation. “More than 40 per cent of respondents now spend more money in these areas than in paid advertising, quite a significant increase from our past research in this area,” Paull added.

According to him, “A successful marketer would be one who is focused more on engagement and less on just awareness and trial. 21 per cent of those surveyed forecast a reduction of more than 20 per cent from the initial FY09 budgets, while 73 per cent predicted declines of more than 10 per cent. R3 had surveyed the same group of marketers in September and the results then were a lot rosier, with 62 per cent saying they anticipated higher budgets in 2009. All that has changed now, the events of the last two weeks have hit marketers hard. There will be significant reductions in the coming year, even in typical growth markets such as China and Taiwan.”

There is a definite re-check on the ad budgets. While some brands have opted for BTL activities, others have opted for cost-effective promotions by airing old TVCs. With most adopting a ‘wait and watch’ policy, the coming weeks will reveal how much more cuts in ad spends and budgets can be expected.